UBS Brass Balls: New Boss Set To Cut Management Layers And ‘Monitor’ Client Interactions

Well, that’s going to leave a mark. In a fairly innocuous article late last week, newly minted and incoming UBS Wealth Management boss, Iqbal Khan, made it clear that a full third of management positions in the wealth division are set to get smoked. Ouch.

If that wasn’t enough to get your attention, then this quote should have:

“In the memo, the executives said client interaction remains at the heart of the bank’s offering, and that from this year, UBS will use new tools to track the time its staff spend with clients, to encourage better service.

(REEEEEEEEEEEEE!!)

So we took to the phones yesterday and talked to several different managers at the firm to get a pulse of what they expect to happen now, and throughout 2020.

A manager in California responded this way, “Khan is known for this, so if anyone expected any different, they aren’t playing the game right. Just like unhappy advisors are aware of other firms, if not genuinely engaged in ongoing due diligence, so should managers at this firm be. If you are asking about the overall climate right now – the ‘tools to track’ is having the most impact. Everyone is concerned about that one.”

A manager in Florida said this about the ‘tools to track’, “that is chilling. Look, we get that the firm is tracking just about everything that happens on your desktop… my question is what comes next? Gives you an idea why Merrill is about to issue company wide phones. For just the reason above. That moves this question beyond key strokes, but now into geo-location, voice, text. Not good.”

A regional director in NYC added, “the management cuts – nothing new and has been happening bite by bite for a decade – so survival of the fittest. The tracking of client interactions has everyone on edge, but I guess if you have nothing to hide you either don’t give a fuck, or it bothers you from a legitimate privacy standpoint. What other data and info will they come across at the same time that they are monitoring ‘client interactions’.”

Some management cuts at the firm have already started, with a guy like Pete Kaldis, in Ohio catching an axe before the holidays via restructuring in the Midwest. More reductions like that will cross the wires throughout the first and second quarters of 2020.

Given the announcements out of the firm in the past few months (grid debacle, expense cuts, management cuts, protocol exit, now client interaction tracking), it feels like the suits are preparing for an ever shrinking advisor force. Instead of drawing a red line at 6,000 advisors, next stop may be 5,000?

Otherwise, why clearly upset the very employees (advisors) who on a daily basis are the geese that lay the golden eggs? Bizarre.

Spousal Support: FINRA Suspends Advisor For Allowing Wife To Move Funds

 FINRA isn’t playing around with ‘procedure’ infractions as of late. Every “dotted i and crossed t” is to be minded if you want to remain disclosure free. Just this past week a new infraction and punishment was announced – as a broker allowed the wife of a client to direct transactions without authority or consent.
“Both the husband and wife were Morgan Stanley customers but the wife had no authorization over the IRA account in question.”

“The Financial Industry Regulatory Authority last week fined Eugene Nathan Gordon $5,000 and suspended him for 90 days for the activities that it said violated its far-reaching Rule 2010 requiring registered reps to “observe high standards of commercial honor and just and equitable principles of trade.”

“Gordon, who now works at WealthSource Partners, a Palo Alto, Calif., registered investment advisory firm, declined to comment on the circumstances behind the acceptance, waiver and consent letter that Finra accepted last Wednesday. He previously worked for 14 years at Morgan Stanley and predecessor firm Smith Barney in Palo Alto.”

“Gordon followed the wife’s instructions to make mutual fund trades resulting in 32 transfers of almost $317,705 from his client’s individual retirement account to their joint bank account over four years ending March 2017, according to the consent letter. The wife had no authorization over the IRA account for which Gordon was broker of record, according to the consent letter.”

Most of the backstory isn’t known, but we could postulate that the nexus of this complaint probably has something to do with a lack of marital bliss. And it is probably appropriate that a three month ban is applied for shuffling the better part of 300k out of ‘hubbys’ account.

Follow the rules folks, follow the rules.

Wells Fargo: “You want a 550% recruiting deal? Come right this way…”

Wells Fargo announced today that they will continue, in perpetuity, the largest recruiting deals on the street. They also reiterated their commitment to significantly reward recruiters for pushing valuable recruits to their multiplicity of platforms with increased recruiting fees that dwarf the industry standard.

Wells Fargo just extended the holiday season for eligible advisors, teams, and recruiters. But there is a bit more to the story that hasn’t been put out into the media over the past year that will grab your attention:

If you are a Tier 1, experienced advisor the actual top end potential with an end of contract kicker is 550%. Yes, you just read that right. 550%. One more time for effect: 550%

How does Wells Fargo get there for its employee channel recruits? First, it offers the aforementioned ‘traditional’ deal structure attached to a 9 year forgivable loan/contract. Then WF decides to add the real sweetener and offers Tier 1 advisors the option to sell their book within the Wells Fargo ecosystem for a stated and committed 225%.

Bam! Pop! Bang!

So if you are a 55 year old advisor at Merill Lynch with a partner, a junior advisor, and two client service associates doing $3m in annual revenue, do a little math. Why don’t we do a little math for you: that’s $16,500,00.00. Take another look at that number.

Meanwhile, with an ongoing recruiter payout that sits at 10% versus the industry standard of 6% – your friendly neighbor recruiter is HIGHLY incentivized to convince you to hit the mf’ing bid!

Take a look at a couple of teams that did just that late last year:

“In December, a five-broker Merrill team in Plano, Texas with $4.5 million of annual revenue joined the “advisor-led” channel of standalone Wells Fargo Advisors offices, following a $4- million team from Morgan Stanley that joined in Boca Raton, Florida, in September.”

If those teams chose the aformentioned deal, their ‘all-in’ payouts are $22M and $24.75M. Eye popping numbers.

Expect Wells Fargo to not only stop the bleeding in 2020 – but to be a favored destination for UBS, Merrill Lynch, and Morgan Stanley advisors looking for comfortable surroundings and a ‘back the truck up’ load of liquidity.

“Listen, you can’t make this sh** up…”; Morgan Stanley Advisor Speaks Up

In a short but impassioned conversation with a Morgan Stanley advisor of several decades, we were struck by his understanding of both the ‘arc’ of the industry and the serious issues that his own firm faces. A lot was said, and we’ve done our best to bring it to you as unfiltered as we possibly can.
Discussing the firm’s protocol exit: “What a sh** show of a decision that is and was. And who benefited the most from that decision? Certainly not the firm or the advisors, but securities lawyers…as nearly anyone with a book of any consequence quickly went out and hired one. If the firm, long term, things that this somehow works out in their favor (as they’ve been heard saying on conference calls) they are dumber than I even believe that they are. At some point a larger migration away from MS will hit the blotter. It will be obvious, when it does.”
Discussing former Smith Barney advisors still upset about the way Morgan Stanley does things: “All of us former SB guys still laugh at the way this place is run and how we are treated. Lip service, yeah that kind of lip service, is given to what we do for the firm at meetings and events with management – but it is only that, lip service. If you did a quick data search on who’s left over the past five years, I’d bet +70% of them are former SB guys.”
Thoughts on current leadership and a little about what Greg Fleming is doing at Rockefeller: “Most of us liked Greg Fleming. He wasn’t a complete douchebag in the classical sense that the ivory tower guys usually are. So he was respected. When he exited stage left we realized that our voice would be less and less heard. What he has built at Rockefeller is compelling and lots of us have given it a pretty good look. They will keep winning with that model, and credit to Greg for doing so.”
On the firms decision to jack up comp grid tiers, further inflaming the firms most succesful advisors: “Listen, you can’t make this shit up, you really can’t. Protocol exit and then a comp grid slap in the face. Seriously, fuck these guys. The protocol deal makes it immeasurably harder to leave, so kudos for that move (sarcasm). The comp grid stuff will add another wave of departures – you can bet on it. At this point, for get about any emotion or loyalty, it turns into math now.”
The conversation lasted about ten minutes and covered even more ground than this, with significantly more colorful language as well. We don’t think it is a surprise to hear a disgruntled Morgan Stanley talk about what ails the firm. It is interesting, though, to hear a 30 year veteran talk about the firm but still remain there. Interesting, for sure.

In Case You Didn’t Know Merrill Guys, BofA Owns You And They Do Whatever They Want

The headline might seems obvious, but the day to day walking out of Merrill Lynch as an ancillary division of Bank of America gets uglier every week. This past week it was the revelation that Merrill Edge advisors will no longer sit in call centers, but rather in the same branches as the once venerable members of the ‘thundering herd’. Ouch.
“About 300 Edge advisors were placed into Merrill branches this year to work with less affluent clients and facilitate referrals of clients with more sophisticated needs. The number should rise to about 2,000 within three to four years, said Aron Levine, head of consumer banking and investments at Bank of America.”

“Those guys have been very effective so far,” Levine said of the Edge employees, who are categorized as Bank of America rather than Merrill advisors and who are paid by salary rather than on production-based grid payouts. “The fact that an FA can have someone right there as opposed to a phone call away in a center…makes a big difference in comfort level and working together.”

“Merrill Lynch does not pay its wealth advisors on household accounts with less than $200,000 at the company, and has used incentives and pay deductions to encourage referring those accounts to Edge. Similarly, Edge’s “financial solutions advisors,” who are generally based in bank branches and call centers, receive incentives to refer affluent clients in the other direction.”

Sooo… thousands of the ‘down market’ advisors who it had been previously promised would stay out of sight and out of mind, will now be cuddling up in offices down the aisle or across the way from you. I’m sure that does wonders for your confidence in BofA having your best interests in mind, right. No.

Expect More And Even Bigger Departures For UBS; Huddled Masses Becomes A Mob

In October nearly half of an entire UBS office in the suburbs of Columbus, Ohio walked across the street and opened a brand new Morgan Stanley location. That move, and some of the subsequent legal back and forth, has been well covered in industry pubs.

But its about to get worse for the shrinking wirehouse in Ohio. In conversations last week, at least one and possibly two of the largest teams in Ohio are in deep conversations to leave the firm.

One source close to a team in the northern part of Ohio said the following:

“They’ve done their due diligence and it is nothing more than timing at this point. Timing as to clients, team internals, and a few dotted i’s and a couple crossed t’s on their preferred deal. And if one were to give just a little bit of thought as to who the team is, I doubt most would be surprised.”

The other team in Ohio that looks to have its track shoes on to make a run for it is in the opposite corner of the state. And our source their said that the recently announced comp grid changes accelerated their plans:

“Any team that was passively engaged in due diligence in terms of a move is smart to accelerate the process. That is what they have clearly done. Why wait around to see how much they enjoy the ‘beatings will continue until morale improves’ culture? That makes zero sense. Expect action quicker than I previously thought.”

To believe that UBS brass thought that they could dramatically (up to 20%) shift both individual and team grids with limited dislocation of some of their prized teams is incredibly stupid. You have to wonder what those meetings were like in the beginning stages over the past year. Did anyone in the room stop and say, ‘guys this is a stupid fucking idea – we are going to get killed by attrition’?

Nataril and his direct charges have swung and missed several times over the past 18 months – or rather since the departure of the two Bob’s (McCann and Mulholland). Ask just about any FA at the firm and they’d quickly opine about the days of ‘quick wins’ and advisor-centric policies.

With Nataril they’ve gotten protocol exit, expense tightening, a near recruiting moratorium, and now comp grid changes that have turned the huddled masses into a mob. Nice work dude.

Massive UBS Team Migrates To RBC; Los Angeles UBS Complex Shrinks Further

As the recruiting year heads to its close the patterns and rhythms in wealth management seemed to have accelerated. Not only are more teams making transitions, but larger teams are doing the same – with the consistent theme being an exodus from wirehouses to regionals or other platforms altogether.
Case in point, a massive UBS team moving to RBC:
“Roger W. Stephens and Dan Rothenberg, who had been with UBS for seven years following a stint at Morgan Stanley, generated fees and commissions of about $12.5 million in the last 12 months on about $7.5 billion of customer assets, said two people familiar with their book. RBC confirmed the asset estimate in a press release about the new team, which it said will open the firm’s first branch in downtown Los Angeles.”

“Stephens and Rothenberg’s clients include corporate retirement plan sponsors, nonprofit organizations and wealthy individuals, according to Stephens’ UBS web biography. The sources said that despite their large book, the advisors chose not to affiliate with UBS’s private wealth management division for very wealthy clients.”

“We are excited to come to a firm that has a smaller, more focused group of people, where we feel we can really make a difference,” Rothenberg, who like his partner was a managing director at UBS, said in a prepared statement.”

Both the assets and production are ‘of scale’ as they say. And it follows another team in downtown LA that left UBS two months ago producing $11 million a year. UBS management in LA may have some explaining to do!

Ami Forte Drama Continues To Unfold; Former Morgan Stanley Superstar Gets FINRA Ban

It’s been a good four years since the Ami Forte shenanigans began. The sordid story of an advisor, a geriatric client, a strange love affair, and epic churning has weaved its way through the FINRA arbitration process and come out the other side. Ami didn’t fair so well.
“The Financial Industry Regulatory Authority has permanently barred Ami Forte, a former Morgan Stanley advisor, for excessive trading and churning in the account of Home Shopping Network co-founder Roy Speer, who had dementia.”
“Morgan Stanley fired Forte in 2016 after Speer’s widow and estate were awarded $34.4 million in an arbitration claim. The firm and Speer are currently in litigation over her obligations to pay part of the award.”

“Forte, who had a romantic relationship with Speer, accepted the lifetime bar without admitting or denying the allegations.”

“I neither placed nor supervised any of the trades that Finra has deemed inappropriate,” she said in a prepared statement that noted the regulator will not be pursuing any claims against her for monetary fines or restitution.  “I am pleased that we have been able to reach an amicable settlement with Finra.”

I don’t know. This one is kind of embarrassing for nearly every party. Morgan Stanley allowed Ami to hand out (insert racy comment here) for outsized commissions. Ami’s team clearly looked the other way while she was handing out said sexual favors. Ami herself made the choice to engage in this scheme and seemed to be totally cool with it. And the client, no matter the cover of some level of dementia, seemed to be more than happy to accept what Ami was ‘handing’ out. Oof.

In the end (and to be clear, this story hasn’t come to its end just yet), Ami no longer has a place at the FINRA table and has admitted that her wealth management career is over. We wonder, though, if state and federal authorities may get involved in the same way they did with Tom Buck. I wonder if that has crossed the minds of Ami’s legal team? Hmmm.